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Company Law Reform Bill [HL]

I intervene briefly to support my noble friend Lord Freeman, particularly with regard to Amendment No. 161. In so doing, I declare an interest as the non-executive director of companies named in the Register of Members’ Interests. I support exactly what my noble friend said about the dangers of litigation. I am a strong believer in ethical values and the wider social, environmental and other responsibilities of business; I participate in a lot of discussions in that regard. But we also know that we live in a very litigious society, and I am concerned that in spelling out these factors it will become, as my noble friend said, much more likely that individual shareholders will engage in litigation. I know that the argument is that the courts will take a preliminary view of whether it is justified for that to take place, but I fear that it will lead to a lot of distractions and cost for companies if this proposal takes hold, and it will be a disincentive to a number of people to become directors. Will the noble and learned Lord the Attorney-General spell out exactly why he thinks that including all these factors will not lead to more litigation? Taking the point raised by the noble Lord, Lord Avebury, about, for example, the position of British Airways in relation to the impact on global climate, it is much more for the Government to look at policies to deal with that, rather than including it in the possibilities that arise here. It would certainly potentially lead to a great deal of litigation for the directors of British Airways. My second point concerns the word ““include”” in Amendment No. 161. I am not a lawyer, so I may not have got this quite right, but it seems to me that the amendment is rather better than the way in which subsection (3) has been drafted. I do not know whether ““have regard to”” means that these are the only factors that should be taken into account and are likely to lead to litigation, but I think ““include”” makes it much clearer. For example, it strikes me that the particular issue of the interests of pensioners is missing from subsection (3). I am not arguing that it should be included but the Pensions Act 2004 will create a lot of difficult decisions for directors in trying to balance the long-term interests of the company and its employees and so on with the requirements that they may well have to meet under the Pensions Act and the activity of the Pensions Regulator. Would the defence be that the Pensions Regulator insisted on certain actions being taken by the company—such as, for example, not paying a dividend or not engaging in capital expenditure which it thinks is particularly important to its long-term future? There will be some difficult and tricky issues for directors that are not recognised in subsection (3). However, my main point is that I am concerned that spelling-out these factors will lead to much greater risks of litigation, with all the consequences that that may have for companies and their directors. I look forward to the Attorney-General’s reply.